New Tool Puts Spotlight on Rule of Law for Business

By Patrick Kilbride and Terri O’Connor, Coalition for the Rule of Law in Global Markets, U.S. Chamber of Commerce

It’s a brave, new, global world for business. Plenty of opportunity; plenty of risk. As e-commerce, free trade agreements, and modern infrastructure have opened the world’s markets, many companies have found that on the frontiers of trade there are not always a lot of rules. And where rules exist, they are not always enforced.

This new tool for business is featured in the 2013 Index of Economic Freedom released by The Heritage Foundation and the Wall Street Journal. Myron Brilliant writes for the U.S. Chamber of Commerce, “Companies look to invest in markets where they have confidence in the integrity of public and private institutions and where there is fairness, enforcement, and proper adjudication of the law.”

Brilliant goes on to note five factors whose presence indicates a strong rule of law environment for business:

Transparency. Laws and regulations applied to business must be readily accessible and easily understood.

Predictability. Laws and regulations must be applied in a logical and consistent manner regardless of time, place, or parties concerned.

Stability. The state’s rationale for the regulation of business — for example, promotion of negotiation and implementation of trade agreements and other vehicles that strengthen rule of law, sanctity of contracts, and compliance with international law — must be consistent and coherent over time, establishing an institutional consistency across administrations, and free from arbitrary or retrospective amendment.

Accountability. Investors must be confident that the laws will be upheld and applied equally to government as well as the private sector and civil society: for example, anti-bribery and corruption issues.

Due Process. When disputes inevitably arise, they must be resolved not by ad hoc arrangements or special interventions, but in a fair, transparent, and predetermined process.

As U.S. Chamber Vice President Jodi Bond commented in an recent post on the Chamber blog, “We feel the business community has been too silent for too long on the subject of the rule of law. … Our goal is to bring companies together, show them the common threads in the challenges they face, and work collectively to bring the leverage of the private sector to bear on the governance deficiencies that undermine the rule of law, and on those who abuse their position to exploit them.”

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The CIPE Development Blog provides coverage of the Center for International Private Enterprise and its partner network at work -- highlighting successes, drawing out lessons from failure, and exploring the broader issues of political and economic development. For more information visit CIPE.org.